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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 133.21+1.2%Jan 31 3:59 PM EST

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From: Jim Mullens9/27/2022 3:38:25 PM
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M Fool- QCOM Stock Is a Buy but Not Because of Its Automotive Segment

True, but why not provide some PE (TTM) comparisons with the high flyers / peers to more dramatically show the excessively low valuation .

+ QCOM....10.6
+ NVDA...,..40.1
+ AMD........27,9
+ TXN........17.6
+ AAPL.......24.9
+ GOOG.....18.6

Further, the author appears to directing his article towards *investors*, and as such future earnings play a significant role in investing decisions. So, why downplay the significance of this new diversification revenue stream opportunity ( $4B in 2 ½ years, $9B in 9 years)?.

Ok, now I see Will Healy appears to be countering Nicholas Rossolillo article “If You Haven't Done So Yet, It's Time to Buy Qualcomm Stock” (below) which emphasizes *all the irons QCOM has in the fire*, including the automotive segment. Of the two articles, I believe Rossolilo’s hits the nail on the head, with his better understanding / appreciation of the company and its new forward diversification direction.

Snip>>>>>

Additionally, investors may not appreciate the company's current valuation. Despite its growth, Qualcomm stock trades at only 11 times earnings. This is lower than every major chip company except for Intel. But unlike Intel, Qualcomm is a technical leader, indicating significant undervaluation in the stock.

Qualcomm is a high-growth chip stock at an excessively low valuation. This situation could mean that it's time to buy Qualcomm stock. Moreover, after its automotive-investor day, Qualcomm's future looks promising in the automotive sector as smartphone chipsets presumably become a less prominent revenue driver.

#1 >>>>>>>>>>>>>>>>>

Qualcomm Stock Is a Buy but Not Because of Its Automotive Segment

By Will Healy – Sep 27, 2022 at 9:15AM

KEY POINTS

Qualcomm hosted its first automotive-investor day recently.

The company has projected massive revenue growth for its automotive segment.

Automotive made up around 3% of company revenue in the most recent quarter.

Qualcomm Stock Is a Buy but Not Because of Its Automotive Segment | The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Qualcomm's automotive segment should grow, but it holds minimal influence over the stock price.

Qualcomm's ( QCOM -0.49%) first automotive-investor day has brought attention to the company for something other than smartphones. The chip designer has diversified into non-smartphone products. While much of its previous effort has focused on the metaverse, Qualcomm is now making its mark on the automotive sector.

The question for stockholders and prospective investors is, how will the automotive pivot drive the stock? Let's take a closer look.

Qualcomm's automotive-investor day

Qualcomm gained attention in the automotive sector when it announced a "breakthrough automotive processor" in 2016. However, 2022 may be the year that puts the Qualcomm automotive segment on the map. After launching the Qualcomm Digital Chassis in January, the company has followed up with the recent investor day.

Its digital chassis applies 5G, telematics, location, and other technologies combined into a set of cloud-connected platforms. This manages a car's communications within a digital cockpit, as well as driver assistance and autonomous-driving functions.

With such functionality, Qualcomm now estimates the size of its design-win pipeline at $30 billion, an increase of more than $10 billion since its recent earnings report. Additionally, Qualcomm believes its total addressable market will grow to $100 billion by 2030, and it has projected its automotive revenue-growth accordingly.

Qualcomm-Projected Automotive Revenues

Fiscal 2022

$1.3 billion

Fiscal 2026

$4 billion

Fiscal 2031

$9 billion

Source: Qualcomm.

The investor conundrum

For what it's worth, I'm a Qualcomm shareholder who's optimistic about its segments, including automotive. In a few years, I believe the digital chassis will boost the investment case for buying and owning this semiconductor stock.

The problem is that Qualcomm has not yet reached that point. In its fiscal third quarter (which ended June 26), automotive brought in $350 million in revenue. This amounts to approximately 3% of the company's revenue.

By comparison, handsets made up about 56% of the company's revenue and grew by 59% year over year, faster than automotive, which grew 38%. Still, Qualcomm expects an eventual slowing in the handset market. Once 5G upgrades slow, it looks increasingly likely that automotive and other segments will drive more growth.

However, with the upgrade cycle in 5G, handset growth has remained rapid. This led to 36% revenue growth in Q3 for Qualcomm overall and a 53% increase in net income as Qualcomm kept the growth of costs and expenses in check.

Additionally, investors may not appreciate the company's current valuation. Despite its growth, Qualcomm stock trades at only 11 times earnings. This is lower than every major chip company except for Intel. But unlike Intel, Qualcomm is a technical leader, indicating significant undervaluation in the stock.

Consider Qualcomm stock, but not yet for automotive

Qualcomm is a high-growth chip stock at an excessively low valuation. This situation could mean that it's time to buy Qualcomm stock. Moreover, after its automotive-investor day, Qualcomm's future looks promising in the automotive sector as smartphone chipsets presumably become a less prominent revenue driver.

However, investors looking for an automotive driver for revenue may not find it in Qualcomm just yet. While it should become an increasingly significant player in the automobile sector, Qualcomm stock will likely be more heavily tied to its other segments for the foreseeable future.



#2 >>>>>>>>>>>>>>>>>>>>>

If You Haven't Done So Yet, It's Time to Buy Qualcomm Stock | The Motley Fool

If You Haven't Done So Yet, It's Time to Buy Qualcomm Stock

By Nicholas Rossolillo – Sep 18, 2022 at 11:06AM

KEY POINTS

Qualcomm's stock has taken another dive on market volatility and worry over declines in the smartphone market.

There's a lot more going on Qualcomm than just smartphones, though.

This stock looks very underappreciated right now.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This chip giant could be seriously undervalued right now.

After an epic rally from 2019 to 2021, shares of mobility chip giant Qualcomm ( QCOM 0.25%) haven't done so well lately. Following yet another sell-off in the market (thanks, inflation), Qualcomm stock is again near its 52-week lows and off over 30% from its all-time high last year.

This is now the third time in a year Qualcomm has fallen to this level -- and this time, it's trading for a meager 11 times trailing-12-month earnings per share. With the company gearing up for a push into new markets, this is another chance to load up on this top chip stock on the cheap.

All eyes are on the smartphone market, but should they be?

The reason Qualcomm is getting punished again has to do with the smartphone industry. After a good two-year run fueled by consumer spending early in the pandemic and an initial wave of 5G-enabled phones, global smartphone sales are hitting a snag. Qualcomm still expects its revenue to rise anyway, by virtue of the fact its content per phone is still increasing thanks to 5G. Plus, its Internet of Things (IoT) and automotive segments are in growth mode right now, too.

Qualcomm has a lot of new developments in the works, though, like personal computing chips, virtual reality processors, and even data center and server hardware. As for this latter end market, rumors in recent weeks suggest that Qualcomm could be plotting a return to the cloud (it exited the data center market about four years ago), utilizing designs from ARM by way of its acquisition of start-up Nuvia last year. In fact, Amazon's ( AMZN -0.58%) cloud computing segment, AWS, has expressed interest in testing Qualcomm's new offerings.

The data center and server market is huge, and it could be an ideal time to take a swing at it. Long-standing leader in this space Intel ( INTC -0.54%) has been ceding market share to AMD ( AMD 1.39%) and Nvidia ( NVDA 1.28%) for years, and even Intel's CEO has admitted it will likely continue to lose market share for the next couple of years. So, why not Qualcomm, too, if there's low-hanging fruit to be had in cloud infrastructure and compute chips?

But the question is: Will it work? There's a chance it could. Qualcomm's bread-and-butter chips for smartphones are a fantastic marvel of engineering. They're powerful, but also ultracompact, energy efficient, and purpose designed for a mobile-connected world. If this same technology could be expanded to also encompass data centers, personal computers, and the like, Qualcomm could go from smartphone specialist to everything-computing generalist.

All of this is to say the market overall is hyperfocused on the immediate-term outlook for Qualcomm's smartphone sales, but it's missing the forest for the trees. There's a lot more to the company than in the past, and it's laying the groundwork for many more years of expansion. Thus, another chance to buy again near 52-week lows after the brutal selling in recent weeks could be a wonderful long-term gift to investors.

But what about the free cash flow?

Of course, using earnings per share, Qualcomm stock looks dirt cheap. However, on a free cash flow basis, shares trade for a far higher 23 times enterprise value to free cash flow. What gives?

Free cash flow can be lumpy, not just from quarter to quarter, but even year to year. Why? New chip development costs money, often requiring ample sums of up-front cash before sales start trickling in. And that's exactly what Qualcomm is up to these days. Its innovation engine has been revving up and could be about to pay off big time in the next year or two, as the spending weighing down free cash flow right now starts to yield results.

All of this hinges on whether Qualcomm's developments for laptops, VR, data centers, and autos do in fact win over customers. But with so many irons in the fire and a proven lineup of chip technology, I like the company's chances at expanding beyond smartphones in at least one -- if not multiple -- new directions. I believe the market keeps selling Qualcomm's long-term prospects short. If you haven't bought yet, this most recent sell-off looks like a fantastic buying opportunity.

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